MNI US Open: ECB Speakers' Tone Remains Dovish

EXECUTIVE SUMMARY:

• ECB'S PANETTA SEES NO JUSTIFICATION FOR SLOWING BOND-BUYING
• MNI CHINA LIQUIDITY SURVEY: INFLATION SEEN EASING
• FRENCH BUSINESS CLIMATE AT HIGHEST SINCE 2018; CONSUMERS ALSO MORE UPBEAT
• CHINA BARS BANKS FROM SELLING COMMODITIES-LINKED PRODUCTS TO RETAIL BUYERS (RTRS SOURCES)
• RBNZ SAYS RATE RISE FORECAST "NOT FORWARD GUIDANCE"

Fig.1: French Business Confidence Rises More Sharply Than Expected In May

Source: INSEE, MNI

NEWS:

ECB (BBG/NIKKEI): European Central Bank Executive Board member Fabio Panetta said he sees no signs of sustained inflation pressures that would allow for a reduction in bond purchases, in the latest move by a top official to downplay expectations of an imminent policy shift. "Only a sustained increase in inflationary pressures, reflected in an upward trend in underlying inflation and bringing inflation and inflation expectations in line with our aim, could justify a reduction in our purchases," Panetta said in an interview with Nikkei published on Wednesday. "But this is not what we projected in March. And, since then, I have not seen changes in financing conditions or the economic outlook that would shift the inflation path upward," he said.

MNI CHINA LIQUIDITY SURVEY: Liquidity across China's interbank market remained relatively loose in May, with overnight and 7-day rates sitting close to official policy ones, signaling that the People's Bank of China will keep monetary policy stable, the latest MNI Liquidity Conditions Index shows. The MNI China Liquidity Condition Index stood at 41.7 in May, up from 34.8 previously, with three quarters of traders surveyed saying conditions were "stable". The index was below 50 for a 7th consecutive month. The higher the index reading, the tighter liquidity appears to survey participants.

MNI CHINA LIQUIDITY SURVEY: Just over half of traders questioned for the MNI China Liquidity Survey said domestic inflation fears were somewhat eased from last month following policy actions by Beijing. In a special question added to the survey, half traders reported an eased concern from last month while 37.5% of the participants still saw inflation as a concern going forward.

CHINA (RTRS): China's banking regulator has asked lenders to stop selling investment products linked to commodities futures to mom-and-pop buyers, three people with knowledge of the matter told Reuters, to curb investment losses amid volatile commodity prices. It has also asked lenders to completely unwind their existing books for these products, which they manufacture and sell to individual investors, said the sources, who are involved in and have been briefed on the decision. The China Banking and Insurance Regulatory Commission's (CBIRC's) order to exit these products has not been reported before. It issued the order this year, two of the sources said.

RBNZ: Economic forecasts which include a rise in official interest rates in the second half of 2022 are "not forward guidance" but are based on confidence that the economy would reach employment and inflation targets, according to Reserve Bank of New Zealand Assistant Governor Christian Hawkesby. Speaking at a press conference following the release of the RBNZ's quarterly Monetary Policy Statement, Hawkesby cautioned that the forecasts are "conditional." "We will revisit the forecasts every six weeks and every three months," said Hawkesby.

UK (BBG): Boris Johnson is facing a barrage of criticism over his handling of the pandemic from his former adviser, Dominic Cummings, who has told a parliamentary committee the prime minister did not take the crisis seriously enough as Covid hit. The ex-aide is giving evidence to a parliamentary hearing about the government's missteps that contributed to the U.K. suffering the worst pandemic death toll in Europe. Cummings leveled the blame at the whole government -- saying ministers and officials had "disastrously" failed the public when people needed them most.

FRANCE/EU/BELARUS (BBG): France's Foreign Affairs Minister Jean-Yves Le Drian says the Belarus decision to force a landing of a Ryanairjet to arrest a dissident journalist is also an attack on the European Union."It's the European Union that's targeted in this affair," Le Drian says in interview on France 2 on Wednesday. The journalist "was exiled in Europe, his wife as well, the airline in question is European, the passengers were European, the flight was European. It's very serious."

EU/ASTRAZENECA (BBG): The European Union attacked AstraZeneca Plc's Covid-19 vaccine supply "failure" and demanded an urgent order for millions more doses in the latest round of a bitter legal dispute over alleged broken promises by the drugmaker.At a hearing that kicked off on Wednesday, a Belgian court is weighing EU claims that there's an emergency situation that merits an order for the drug maker to deliver 20 million more shots than it has promised so far by the end of June. The same court will examine later this year whether Astra violated the terms of its contract.

RIKSBANK: The key financial vulnerabilities in Sweden, with its low public debt levels, come from high household borrowing and its banks' exposure to the highly priced residential and commercial property markets, the Riksbank said in its Financial Stability Report (FSR) published Wednesday. "A crisis in the property market can threaten the stability of the Swedish financial system," it said, with highly leveraged property firms vulnerable to companies cutting back on office usage, hitting the commercial property sector.

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